A Good Article on Annual Financial Moves to Make
The Financial Samurai published a great post this week. 10 Helpful Financial Moves to Make Every Year. I decided it would be a good exercise to work through each one.
Review your asset location - Investors should rebalance at least twice a year.
My overall portfolio split:
70% in the stock market. 20% of which is in 401K and Roth IRA, and the rest is invested in 7 individual stocks and 1 ETF.
10% is in real estate through Fundrise, which will drop to <5% as of January 1 after liquidating half of that investment.
5% is in passive investments.
15% is in cash, increasing ~20% as of January 1. Since we’ve just relocated, and are focused on building our lives I don’t want to be beholden to the performance of the market. I’m still not convinced that we won’t experience a downturn in the next 12 - 18 months, and I’d rather have the cash on hand to invest in a house, a business, or cheap stocks, then manage the stress of selling stocks while the market is down. It helps that with increased interest rates my cash is earning 5%. In liquidating a lot of my positions I did miss out on additional gains in the last quarter of the year, but those extra gains assume I actually pulled money out while the market was up (see lesson #1 here). The term unrealized gains exists for a reason.
Review Your Income and Spending - Chances are high you're spending more than you realize
A review of credit card bills and an estimate of cash spent shows that last year we spent just slightly more than I would’ve guessed. We had some big expenses that I hadn’t anticipated (3 weeks in Switzerland, a 3 month road trip), but we also lived rent free for the summer and during our road trip our rent expense was limited to hotels and Airbnb’s.
Declutter and Donate to Charity - What expense are you currently carrying that you didn’t realize you picked up, and get rid of them in the new year.
Other than rent, our recurring monthly bills are minimal, and in 2024 we’ll lose some (interest free debt) and pick up others (health insurance, car expense). Variable expenses (as opposed to fixed expenses) like food, travel and health items (gym, supplements etc…) make up the bulk of our expenses. So we can limit them if needed. Since our expenses are not overly extravagant, trying to reduce the cost of living for us seems futile. Instead I’ll be focused on increasing top line income in 2024.
Update Your Resume
It’s hard to update your resume when you haven’t worked in five years. Very likely the reason I haven’t received one positive response from the 40 applications I’ve submitted over the last 1.5 years. Just one more reason I can’t go back to work.
Part of this rule is to look back at everything you’ve accomplished over the lat year, which is an exercise I started doing back in 2020. In the beginning of January I write My Year In Review, followed by Goals and Plans. In the review I go as far as listing individual books I read, miles I ran, or countries I visited. I take stock of my financial position, and I do a reassessment of my allocations (Rule #1 for Sam). In my look forward, I layout things I want to accomplish. A specific trip. Getting involved in a certain industry. I also start thinking about expenses that are coming up, which investment(s) I need to liquidate, and how to do this while achieving my financial goals.
Keep Yourself and Your Family Safe - Besides health care, please make sure your housing insurance, car insurance, and personal property insurance coverage are enough
A few years ago I explored purchasing life insurance. At the time I thought there was an opportunity to use it as an investment. When I found out I was wrong I nixed the whole idea. But now that we’re starting to build a life together I’m going to explore my options again.
Review Your Estate - At least have a will, or have an updated will if your financial circumstances have significantly changed.
Similar to life insurance I never felt the need to have a living will. But that’s changed. I’ve seen advertisements for Livingwill.com and given the simplicity of my life I’m going to explore to see if using this site is a possibility.
Forecast Future Tax Liabilities - Plan for your future tax liabilities by doing a pro formal analysis on your expected income and expenses.
In 2023 I liquidated a sizable amount of my stock portfolio and I have long term capital gains taxes as a result. One reason I liquidated a large portion was to invest in ourselves and a home as I mentioned above. The second reason is that I plan on generating taxable income this year. Since taxable income and capital gains combine to raise your tax bracket, by selling stocks in 2023 I’ve lowered the tax burden in 2024.
Tie Up Loose Ends - Start the new year with the least amount of baggage possible so you have maximum momentum to achieve your new goals.
His list is mostly financial, mine is more functional.
Colorado driver’s license (appt Jan 2)
Annual doctors visit (appt Jan 9)
Car registration
Taking care of all of these to do items won’t directly help with achieving financial goals, but they can indirectly hurt them. Having a long to do list takes energy and attention away from achieving bigger goals. Knocking off these items on your list frees up that brain space to focus.
Run Your Investment Portfolio Through A Free Checker
The Financial Samurai suggests using Empower’s Retirement Fee Analyzer. I haven’t done this and I probably won’t. It requires linking all of your accounts to their website, and that’s something that I’ve become skeptical of in recent years. I like to limit who has access to my information. With that said, millions of people use these apps, and if you’re inclined for a free checkup, go for it. I give my portfolio a lot of attention, and I feel confident that it’s in a good position.
Rekindle Neglected Relationships
If I’ve neglected you over the last year, I apologize and I’ll do better in 2024. Living on the road, moving and focusing on building a life takes its toll. But I love every one of you and I plan on being more present in 2024.
Bonus: Work On Your X-Factor
This is it. I’m doing it. It’s taken me five years to figure out what I’m doing, but now that I’m here I feel great about it. In 2024 I plan on building this newsletter, building my website, and growing my reach to see how many people I can connect with on promoting health, wealth and happiness!